Last week’s Sunday edition of Australia’s Financial Review contained what turned out to be some illuminating comments from Bronte Capital’s John Hempton, “one of the country’s most vocal and aggressive short sellers”.
The investor, who owns shares in just one ASX listed company, Xero, reckons the accounting software group that has a AUS$5.4 billion market cap, could grow to be a AUS$100 billion mega-company.
“If any Australian company has the potential to be a $100 billion tech giant, it’s Xero,” Hempton says. “In order to pull that stunt, they need to succeed in what the global ambition of Xero should be – we are the backbone accounting system all round the world and everyone plugs into us.”
Several other suitors
Interesting. Because a few days later came the announcement that Xero had made its biggest acquisition, scooping Canadian document capture outfit Hubdoc for $70 million ( that’s AUS$94 million). Tellingly, it beat off several other suitors.
OK, the AUS$100 billion is a way off yet. But one starts to see where things are heading. For instance, late last year, Intuit bought time-tracking app group TSheets for $340 million. RBS bought Freeagent for £53 million. Iris bought Taxfiler in its latest acquisition a couple of months ago. Sure, companies are always buying other companies…..but!
Xero launched in Canada a couple of months ago. And remember, it’s mission is to “rewire the global economy by connecting millions of businesses to their banks, advisers and each other”.
Data from bills
Toronto-based Hubdoc’s software is used by accountants and small businesses to capture data from bills and statements from organisations such as banks, utilities and suppliers.
Xero chief executive Steve Vamos says Hubdoc, which has 100 employees, will run as a stand-alone business under co-CEOs Jamie McDonald and Jamie Shulman.
He says Hubdoc fits with Xero’s ambition for “code-free accounting”, where software automates the accounting process, so accountants “no longer have to worry about transaction coding and matching invoices up to specific budgets or accounts”.
Hubdoc employs 100 people and says its product automatically collects bank statements, bills and receipts from more than 700 financial institutions, utilities, telecom providers and suppliers before synchronising with accounting systems like Xero.
Steve says of the deal: “Both [companies] are born-in-the-cloud companies with a shared vision for delivering innovative solutions that make it easier for accountants, bookkeepers and small businesses to share data, uncover insights and plan for the future,” he says.
“The acquisition also means we expand our presence in Canada, where we just launched in May, and establish Xero as an employer of choice for tech talent in Toronto, along with growing our teams in Australia and the UK where Hubdoc has a presence.”